DOR Doriemus

 
TIDMTEX 
 
20 June 2012 
 
                            TEP EXCHANGE GROUP PLC 
 
                           ("TEP" or "the Company") 
 
               Capital Reduction, Notice of GM and Notice of AGM 
 
TEP today announces its intention to effect a capital reduction by way of 
cancellation of its Deferred Shares and cancellation of its share premium 
account in order to effect dividend payments to members. The Company proposes 
to pay an interim dividend of 0.03p per Ordinary Share in due course. The 
notice to members convening the General Meeting will be sent to members later 
today. The expected timetable for the Capital Reduction is as follows: 
 
Publication date of the shareholder                                20 June 2012 
circular 
 
Latest time for receipt of Forms of                  10.05 a.m. on 11 July 2012 
Proxy for the General Meeting 
 
General Meeting                       10.05 a.m. on 13 July 2012 (or as soon as 
                                      the annual general meeting of the Company 
                                     convened for the same date and place shall 
                                              have been concluded or adjourned) 
 
First Directions Hearing                                           16 July 2012 
 
Court Hearing to confirm the Capital                               25 July 2012 
Reduction 
 
Effective Date for the Capital                                     26 July 2012 
Reduction 
 
In addition, the Company has today sent a notice of annual general meeting to 
members, the details of which are set out below. 
 
Background to and reasons for the Capital Reduction 
 
As members may be aware, on 12 November 2010 the Company entered into a 
non-exclusive licence agreement with SL Investment Management Limited ("SL"), a 
48.26 per cent. Shareholder in the Company, to licence its electronic platform 
and all technology to SL. In addition, SL was granted exclusive rights to 
develop and modify the electronic platform for a quarterly fee of GBP230,000 to 
enable SL to put additional financial products on to the platform. 
 
These licence arrangements have been greatly beneficial to the Company; 
however, there was a time lag before the revenues received pursuant to these 
agreements were received and, therefore, the Company arranged a subscription of 
GBP90,000 (before expenses) to fund its immediate short term working capital 
requirements. The subscription was completed in November 2011 at a price of 
0.02p per share. For every share subscribed, the Company issued 10 subscription 
warrants which were exercisable at 0.002p. Since the exercise price of the 
subscription warrants was below the nominal value of the Company's then 
existing ordinary shares, the Company undertook a capital reorganisation. As 
part of that reorganisation, the existing deferred shares of 0.99p each were 
sub-divided into 990 Deferred Shares and each of the ordinary shares of 0.01p 
were subdivided and redesignated into one Ordinary Share and nine Deferred 
Shares. 
 
The subscription warrants can only be exercised if the Company and its wholly 
owned subsidiaries achieve average annual consolidated revenue of over GBP600,000 
per annum over the three financial years ending 31 December 2013 or, if 
earlier, the Company and its wholly owned subsidiaries achieves consolidated 
revenue of at least GBP900,000 in each of the financial years ended 31 December 
2011 and ending 31 December 2012. 
 
In either case, the Company will have to have declared, made and paid dividends 
of at least GBP250,000 to all members overall in respect of the period, before 
the subscription warrants may be exercised. 
 
On 20 June 2012 the Company announced its final results for the year ended 31 
December 2011. The profit before and after taxation was GBP666,082 compared to 
the loss before and after taxation of GBP86,458 in 2010. Despite the turmoil in 
the financial markets and the current limited demand for traded endowment 
policies the Company's trading performance in the current financial year had 
improved compared with 2011 and 2010, primarily as a result of the income 
derived from the licence agreement with SL referred to above. In 2010 and 2011, 
the Company and its wholly owned subsidiaries achieved consolidated revenues of 
GBP164,776 and GBP1,044,472, respectively. 
 
On 2 April 2012, the Company announced that SL had informed the Company that 
the income generated under the licence agreement during the 12 month period 
ended 30 April 2012 was not expected to reach the required amount in accordance 
with the agreement and, therefore, it may elect to terminate the licence 
agreement in accordance with its terms. The Company agreed with SL that it 
would grant an extension to the termination notice period to allow SL to 
further assess the benefits of the licence agreement. The agreement is 
currently able to be terminated on 30 August 2012 by SL giving 30 days' prior 
written notice to the Company. 
 
Even though SL may choose to terminate the licence agreement, the Directors 
believe that it is still appropriate to pay dividends from revenues already 
generated. Accordingly, subject to the Capital Reduction being approved by 
members and the Court, it is the current intention to pay an interim dividend 
of 0.03p per Ordinary Share in due course. 
 
In order to be able to pay dividends, the Company must create distributable 
reserves, which requires Court approval of an application for a reduction of 
share capital and a capital reconstruction. Accordingly, in order to achieve 
this, the Company is now seeking members' approval of the Capital Reduction. 
 
The Deferred Shares have no voting rights and carry no entitlement to vote at 
general meetings of the Company; nor are they admitted to trading on AIM or any 
other market. The Deferred Shares carry only a priority right to participate in 
any return of capital to the extent of GBP1 in aggregate for all shares of the 
class. In addition, they carry only a priority right to participate in any 
dividend or other distribution to the extent of GBP1 in aggregate over the class. 
In each case, a payment to any one holder of Deferred Shares shall satisfy the 
payment required. As such, the Deferred Shares are, for any practical purposes, 
valueless. No share certificates were issued in respect of the Deferred Shares. 
 
The Notice of GM set out at the end of the circular to members contains 
resolutions to give effect to the Capital Reduction. The implementation of the 
Capital Reduction is subject to the approval of members at the General Meeting 
by passing Resolution 1, confirmation of the Court and the Court Order being 
registered by the Registrar of Companies. It is expected that on 25 July 2012 
the Court will hear the Company's claim form under section 641 of the Act for 
an order confirming the Capital Reduction. The Court will require to be 
satisfied that the interests of the creditors of the Company will not be 
prejudiced as a result of the Capital Reduction. It is the intention of the 
Company to obtain consent to the Capital Reduction in writing from each of its 
creditors. 
 
The Court Order, if approved, is expected to be registered under the Act and 
the Capital Reduction is expected to become effective on 26 July 2012. 
 
Annual general meeting 
 
A notice convening the annual general meeting to be held at the offices of 
Merchant Securities Limited, 51-55 Gresham Street, London EC2V 7EL at 10.00 
a.m. on 13 July 2012 has been sent to members today. 
 
General Meeting 
 
A notice convening the GM to be held at the offices of Merchant Securities 
Limited, 51-55 Gresham Street, London EC2V 7EL at 10.05 a.m. on 13 July 2012 
(or as soon as the annual general meeting of the Company convened for the same 
date and place shall have been concluded or adjourned) is set out at the end of 
the circular to members. 
 
Defined terms used in this announcement are set out below. 
 
Further enquiries: 
 
TEP Exchange Group plc 
 
David Roxburgh                                               00 353 87 2431 665 
 
Merchant Securities Limited 
 
Simon Clements/Virginia Bull                                      020 7628 2200 
 
                                  DEFINITIONS 
 
The following definitions apply throughout this announcement unless the context 
requires otherwise: 
 
"Act"                             the Companies Act 2006 
 
"AIM"                             a market operated by London Stock Exchange 
                                  plc 
 
"Board" or "Directors"            the directors of the Company as at the date 
                                  of this announcement 
 
"Capital Reduction"               the proposed cancellation of the Deferred 
                                  Shares and cancellation of the share premium 
                                  account 
 
"Company"                         TEP Exchange Group PLC 
 
"Court"                           the High Court of Justice in England and 
                                  Wales 
 
"Court Order"                     the order of the Court confirming the 
                                  Capital Reduction 
 
"Deferred Shares"                 the 225,897,991,731 deferred shares of 
                                  0.001p each in the capital of the Company 
 
"Directors"                       George Kynoch, David Roxburgh, Abraham Weitz 
                                  and Moses Kraus 
 
"Form of Proxy"                   the blue form of proxy accompanying the 
                                  Shareholder circular for use in connection 
                                  with the General Meeting 
 
"General Meeting" or "GM"         the general meeting of the Company convened 
                                  for 13 July 2012 pursuant to the circular to 
                                  members 
 
"members"                         holders of Ordinary Shares 
 
"Notice of GM"                    the notice of General Meeting 
 
"Ordinary Shares"                 the 849,999,999 ordinary shares of 0.001p 
                                  each in the capital of the Company 
 
"Resolutions"                     the resolutions set out in the Notice of GM 
 
 
 
END 
 

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